nondiscrimination testing

401(k) Nondiscrimination Testing Refunds

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Has your qualified plan nondiscrimination testing resulted in refunds to any highly compensated employees (HCEs) during the past five years? This is the question posed to 282 public and private for-profit companies, during the 2020 Annual Survey conducted by Newport Retirement Services and PLANSPONSOR.

Below are the survey results provided to us courtesy of Newport Retirement Services.

401(k) Nondiscrimination Testing Refunds Survey Findings

Sixteen percent of companies surveyed responded that in the past few years, they have experienced 401(k) refunds paid back to highly compensated employees (compensation of $130K+ annually) due to nondiscrimination testing.

401k Nondiscrimination Testing Refunds

Marketplace Insights

In recent months, due in large part to recent economic concerns arising from the pandemic and its serious impact on all employees and particularly on lower wage earners, there has been an increased level of discussion in the plan sponsor community around qualified plan nondiscrimination testing.

As nondiscrimination testing continues to impact an increasing number of employees, one of the key takeaways is the ability for plan sponsors to implement a nonqualified deferred compensation (NQDC) plan that includes a deferral election feature that allows for an automatic increase in a participant’s annual deferral equal to the amount of the qualified plan refund. Note that plan sponsors can also add this feature to an existing NQDC plan.

Source: Newport/PLANSPONSOR Executive Benefits Survey, 2020 edition.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.

Securities offered through Lion Street Financial, LLC (LSF) and Valmark Securities, Inc. (VSI), each a member of FINRA and SIPC. Investment advisory services offered through Lion Street Advisors, LLC (LSA) and Valmark Advisers, Inc. (VAI), each an SEC registered investment advisor. Please refer to your investment advisory agreement and the Form ADV disclosures provided to you for more information. VAI/VSI and LSF/LSA are non-affiliated entities and separate entities from OneDigital and Fulcrum Partners.

Unless otherwise noted, VAI/VSI, LSF/LSA are not affiliated, associated, authorized, endorsed by, or in any way officially connected with any other company, agency or government agency identified or referenced in this document.

Lion Street Advisors // Lion Street Financial

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